PSI13.3.34 - Withdrawal from Service: Maximum Deferred Benefits – Pension Sharing on Divorce – Calculation of the Pension Debit – Lump Sums

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

Where an employee’s benefit entitlement in the scheme is

• permanently reduced by a pension sharing on divorce order (see PSI3.5.4), and
• the pension debit must be taken into account for Revenue limits purposes (see PSI6.5.89)

the maximum permissible lump sum benefit must not exceed

for a post Finance (No 2) Act 1987 member

• 2.25 x initial rate of pension payable (see PSI13.3.16) after reduction to take account of the pension debit (see PSI13.3.33), or
• 3 x initial rate of pension payable (see PSI13.3.16) after reduction to take account of the pension debit (see PSI13.3.33) where the scheme rules provide for a pension and separate lump sum,

and for a pre Finance (No 2) Act 1987 member the greater of

• 2.25 x initial rate of pension payable (see PSI13.3.16) after reduction to take account of the pension debit (see PSI13.3.33) where the lump sum is by commutation of pension, or
• 3 x initial rate of pension payable (see PSI13.3.16) after reduction to take account of the pension debit (see PSI13.3.33) where the scheme rules provide for a pension and separate lump sum, or
• the maximum approvable lump sum determined in accordance with the scheme rules as if there had been no pension sharing on divorce order (see PSI13.3.16), reduced by an amount of

2.25 x the pension debit (see PSI13.3.33) where the lump sum is by commutation of pension, or
3 x the pension debit (see PSI13.3.33) where the scheme rules provide for a pension and separate lump sum.